Sunday, April 08, 2007

Vonage! What Next?

Voip pioneer Vonage got a temporary reprive from an almost certain death sentence when a federal appeals court temporarily stayed a federal judge's order that Vonage stop signing up new customers until it stops infringing on patents held by Verizon.

U.S. District Judge Claude Hilton ruled Friday morning that Vonage stop signing new customers after a jury found that it had infringed on several patents held by telecom giant Verizon. Hilton said he considered the possibility that his order could result in bankruptcy for Vonage, which has seen its stock price plummet in recent months.

So what next and can it survive the patent verdict. What will happen to its existing customer base.

I think Vonage will be bought by a telecom company and most probaly Verizon at a throw away price. Verizon will acquire 2 million paying customers at a price which will be miniscule compared to what Vonage paid to acquire those customers. Per Buckingham Research Associates analyst Qaisar Hasan Vonage spends at least $300 acquiring each customer.

The next question is if Vonage fails, will VOIP survive. I think any technology which challenges the status quo and brings discernible cost cutting to consumers will survive whether the company which pioneered the technology survives or not. There will definitely be a shake up in the voip industry. Smaller comanies will get acquired or merge with one another to add critical mass. But the voip technology is here to stay.